1. The problem of water in the Middle East and North Africa (MENA)

MENA is most water-scarce region, and demand is growing Available renewable water resources have fallen from 4,000 m3 per person per year in 1950 to 1,000 today and will fall to 550 by 2050

Important to recognize the region’s progress -- technical & institutional innovations Major investment in infrastructure –Water storage –Huge expansion of services – 80% WSS coverage projected to achieve MDGs –Technical innovation (desalination, wastewater re- use) Institutional innovation –Improving efficiency of utilities –Demand management –Devolving responsibility for managing local systems to communities –River basin / groundwater management

But major management challenges remain Use already exceeds renewable supplies Local level conflicts are frequent

Countries rely on non-renewable water and trade to fill the gaps

Climate variability is projected to exacerbate aridity in the future

Many countries using both public money and water inefficiently Share of freshwater resources stored in dams Lots of water storedBut not all used well

2. Why are water reforms not high in the political agenda?

Accounting has not adequately captured the costs of degradation

Environmental degradation is composed of many factors

Over-extraction of groundwater reduces a country’s savings Groundwater not being converted Into other forms of capital in equal amounts

Intermittent supply of urban water has imposed costs to society Intermittent supplies at different times of the year in Jordan, Yemen, West Bank, Gaza, Algeria, Saudi Arabia Done because of deferred maintenance, and as a rationing tool Costs of coping with intermittent supply for households ≈150% monthly utility bill Increase O&M costs for the utility by 40-50%

3. The potential solution?

Engineering Water services End-use efficiency Allocative efficiency More water More use per drop More value per drop Supply management Services Overall demand management MNA countries now need to move to a new paradigm of flexible allocation

Allocation can be by price or by quantity Price does not work well to reduce overall water demand –Studies indicate that to affect consumption, the price of irrigation water (85% of consumption) would have to rise by more than 5 times cost of providing service – politically impossible –Price does regulate domestic water consumption but this is more a financial issue for the utility Therefore, some sort of quantity restriction is necessary If the allocations are done through water rights, those rights can be traded between users

To achieve flexible allocation, countries have to address three types of scarcity 1) Scarcity of resources Storing, diverting and transferring water, expanding water services. Primarily a technical challenge 2) Scarcity of organizational capacity Strong organizations established to plan water management and deliver services to people in the 1970s and 1980s. Viewed as a management challenge 3) Scarcity of external accountability Rules to ensure that service providers are accountable to their users and government agencies to their constituents. Primarily a governance challenge requiring transparency and inclusivity

Mechanisms of public accountability form a bridge between citizens and government information voice justice CitizensGovernment

Countries with better accountability deliver better services Increased participation provides information necessary for making good decisions and providing good services Government and service providers must see consequences of actions Populations must be able to evaluate where public money is spent

The Challenge for Water Accounting Produced capital Other sector implications Historical investment data Share of produced assets in total wealth is constant across income groups AFP Fund not utilized for stated objectives Intangible Capital  Difference between total wealth and the produced and other produced and natural stock – Human Capital, institutions and governance  How to measure policies and institutions for natural resource management? Natural Resources Country-level data on physical stocks Estimates of natural resource rents based on world prices and local costs Share of natural capital in total wealth falls with income, and of intangible assets rises

Intangible capital is facilitated by external accountability mechanisms Laws, norms Budget rules Public good concerns Common pool concerns Access to information Voice Access Cost recovery to Justice Indicators of External Accountability External accountability has two challenges for accounting: How can structure of laws, conventions and financing rules be measured? How can information uncertainty be captured as a cost?

Summing Up: Measuring external accountability the new frontier Government Information Laws Cost-recovery, public budgeting Inspections, courts Rules for public disclosure Financing Enforcement / Dispute resolution Citizens Information Payment for services Self-regulation, community and traditional dispute resolution

Political drivers of water reform are changing – accounting innovations help Interest Groups Policy-Makers Political Economy Social & Cultural Forces Economic Forces Environmental Forces Technical Options Institutions Trade, fiscal crisis Droughts, floods Desal costs Migration, increased education Water Outcomes